Economic side of veterinary work2. Practical applications
What to expect? Approach to economic calculations The cow level: reproduction The herd level: mastitis The herd level:...
Remember …. animal diseases cost money 10 % of the gross production volume ~ 40-50 % of the net income   (Dijkhuizen, 199...
How to study animal disease? Changes in output of farm, given farm structure,  input and diseases Necessary data:    ● E...
Modelling to estimate effects of diseasesand disease control Simulation model Input data based on data, literature, expe...
Models ……. do not capture the complexityof the real situation
Models……. are sometimes nicer thanreality (too good to be true)
Some terminology Static vs dynamic    ● behaviour over time Deterministic vs stochastic    ● definite predictions or ave...
What to expect? Approach to economic calculations The cow level: reproduction The herd level: mastitis The herd level ...
Two decisions around reproduction When do I start with inseminations When do I stop with insemination
11           Difficult calculationCow factors● First ovulation● Probability of detection● Probability of conception● Milk ...
Model Monte Carlo stochastic simulation Interactions and dynamics at cow level Time steps of 1 week Different VWP (6-1...
Stochastic dynamic modelling                      Cow         •   Breed         •   Parity         •   Month of calving   ...
14     cow                                  Probabilitiesno                                based on cow     Ovulation     ...
15                     Average results                               Voluntary waiting periods                     6 wk   ...
Economic consequences                 (€/cow/year)                             Voluntary waiting periods                7 ...
Average                          60                          50Net losses (€/cow/year)                          40        ...
18             But 6 weeks not always optimal                  40                  35                  30Percentage cows  ...
19       Longer VWP when ….Cow factors             Economical factors ● Parity = 1              ● Lower costs low milk ● N...
What to expect? Approach to economic calculations The cow level: reproduction The herd level: mastitis The herd level:...
Costs of mastitis Mastitis is a costly disease Estimiations between € 55 – 97 per cow per year    ● The Netherlands: €78...
Total costs of disease These costs are only half of the story Definition of costs of an animal disease (McInerny et al.,...
Remember this one?                High losses, low control                expenditures Failure costs (€)                  ...
Material Questionaire dataset of 189 farms (Santman-Berends et al., 2011)     ● General questions     ● Livestock managem...
Normative calculations losses
Costs of prevention When present the following were calculated according to Huijps et al. (2010):    ● Cleaning cubicles ...
Estimated costs (€/cow/year) for mastitis                        Average      5%          95%                             ...
Failure costs vs preventive costs
Cost-effectiveness of preventive measures  -18 management measures (Huijps et al., 2010)     -Quantify effect     -436 sci...
Additional    Reduced                                                              expenditures   losses    Net benefitMil...
What to expect? Approach to economic calculations The cow level: reproduction The herd level: mastitis The herd level:...
Economic effects of PRRS•    Decrease in litter size•    Decline in average daily gain and feed efficiency•    Reproductiv...
Methods•   Two strategies:       – Depopulation – repopulation       – Herd closure with off-site rearing of weaned piglet...
Results Depop-repop, equal piglet price: Breakeven in 11.8 yrs Depop-repop, higher piglet price: Breakeven in 2.2 yrs H...
What to expect? Approach to economic calculations The cow level: reproduction The herd level: mastitis The herd level:...
Foot and mouth disease EU is free of FMD What do with outbreak? EU regulations Additional measurements Problem is:   ...
Inter-FMD: a simulation model Monte Carlo simulation    ● 100 replications to obtain insight in variation of        outco...
What to expect…..• of an outbreak on a dairy farmsurrounded by  •240 farms in a radius of 10 km (A)  •1923 farms in a radi...
EU control measures                         Sparse (A)    Dense(B)                         50%    95%    50%    95%# infec...
Other measures (dense)             EU        Prev-1   Vacc-2    Vacc-4Farmsrendered     2.262     281      76        74vac...
Adding economics (* mln €)                  EU      Prev-1          Vacc-2             Vacc-4                             ...
What to expect? Approach to economic calculations The cow level: reproduction The herd level: mastitis The herd level:...
BSE 1986 first described 1996 -> link with Creutzveldt Jacobs Disease (vCJD) Since August 1989 measures against BSE in ...
Model Stochastic 3 types of BSE    ● Clinically affected    ● Test detectable    ● Non detectable (3 for every detectabl...
Costs Removal of specific risk material (~60 kg): €/kg slaughtered weight Transport of specific risk material Post mort...
Results - retrospectiveYear                                        2002                     2005Number of BSE cases (total...
Costs (mln €)                        2002    2003    2004    2005  Year  SRM removal                        19.22   18.27 ...
Cost-effectiveness
Cost-effectiveness 2002-2005
What to expect? Approach to economic calculations The cow level: reproduction The herd level: mastitis The herd level:...
Key messages from examples Inseminations     ● Start early Mastitis     ● Be careful with additional prevention     ● Wo...
Farmers underestimate costs of disease                     200                     180                     160            ...
There is more than economics Money is only one motivator for a farmer
Thank you for your attention                                                On-line courses on @henkhogeveen              ...
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Economic side of veterinary work: practical applications

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This is the second invited presentation I gave in Bangkok at the 38th ICVS. It provides a number of examples of economic calculations to support veterinary decisions at various levels.

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Economic side of veterinary work: practical applications

  1. 1. Economic side of veterinary work2. Practical applications
  2. 2. What to expect? Approach to economic calculations The cow level: reproduction The herd level: mastitis The herd level: PRRSV Country level: foot and mouth disease Human health: BSE Final remarks
  3. 3. Remember …. animal diseases cost money 10 % of the gross production volume ~ 40-50 % of the net income (Dijkhuizen, 1990) £ 180/cow/year ~ 20 % of the average gross margin (Esslemont and Kossaibati, 1995)
  4. 4. How to study animal disease? Changes in output of farm, given farm structure, input and diseases Necessary data: ● Economics and disease data ● Not available Attempts unto sofar ● Low precision in diseases (e.g., Rougoor et al., 1997) ● Low number of farms (e.g., Rougoor et al., 1999)
  5. 5. Modelling to estimate effects of diseasesand disease control Simulation model Input data based on data, literature, expertise Relatively cheap Pragmatic approach Bio-economic modelling: economics combined with detailed physiological basis
  6. 6. Models ……. do not capture the complexityof the real situation
  7. 7. Models……. are sometimes nicer thanreality (too good to be true)
  8. 8. Some terminology Static vs dynamic ● behaviour over time Deterministic vs stochastic ● definite predictions or averages (deterministic) ● output is probability distributions (stochastic) ● variability of the system uncertainty of knowledge Spatial ● Space effects play a role Optimization vs simulation ● optimum solution, given an objective ● outcome given a pre-defined set of input
  9. 9. What to expect? Approach to economic calculations The cow level: reproduction The herd level: mastitis The herd level PRRSV Country level: foot and mouth disease Human health: BSE Final remarks
  10. 10. Two decisions around reproduction When do I start with inseminations When do I stop with insemination
  11. 11. 11 Difficult calculationCow factors● First ovulation● Probability of detection● Probability of conception● Milk production level● Reproductive disordersEconomical factors A complex system of● Milk price dynamics and● Costs of insemination interactions● Costs of culling● Costs of calving management
  12. 12. Model Monte Carlo stochastic simulation Interactions and dynamics at cow level Time steps of 1 week Different VWP (6-15 wks) for the same cow Input for Dutch situation (Inchaisri et al., 2010) ● Literature ● Expertise
  13. 13. Stochastic dynamic modelling Cow • Breed • Parity • Month of calving • Milk production • Farm level • Relative performance • Persistence START OF CYCLE
  14. 14. 14 cow Probabilitiesno based on cow Ovulation yes factorsno Oestrus detected yesno Insemination yesno Conception yes Calf
  15. 15. 15 Average results Voluntary waiting periods 6 wk 7 wk 9 wk 11 wk 13 wk 15 wkFirst insemination 10.9 11.5 13.1 14.8 16.8 18.5Calving interval 391 393 401 410 421 433MP/cow/year (kg) 8200 8188 8157 8112 8056 7997Insemations 1.89 1.86 1.78 1.74 1.70 1.69Calves/cow/year 0.93 0.93 0.91 0.89 0.87 0.84Not pregnant (%) 0.018 0.019 0.021 0.025 0.030 0.037
  16. 16. Economic consequences (€/cow/year) Voluntary waiting periods 7 wks 9 wks 11 wks 13 wks 15 wksMilk 2.2 8.9 18.3 32.4 46.4productionCalves 0.1 0.3 0.6 1.0 1.7Culling 0.4 1.6 3.4 6.3 10.1Inseminations -0.5 -1.6 -2.0 -2.8 -3.1Calf -0.1 -0.5 -1.0 -1.8 -2.9ManagementNet total 2.1 8.6 19.0 34.2 52.2 (-16-22) (-11-32) (-6-53) (4-78) (13-106) 16
  17. 17. Average 60 50Net losses (€/cow/year) 40 30 20 10 0 6 7 8 9 10 11 12 13 14 15 VWP (weeks)
  18. 18. 18 But 6 weeks not always optimal 40 35 30Percentage cows 25 20 15 10 5 0 6 7 8 9 10 11 12 13 14 15 Optimal VWP (wks)
  19. 19. 19 Longer VWP when ….Cow factors Economical factors ● Parity = 1 ● Lower costs low milk ● Not Holstein Frisian production ● High persistence ● High costs of inseminations ● Low production ● High costs culling ● Late peak in production ● Calved in winter ● Bad oestrus detection ● Late first ovulation ● Reproduction diseases
  20. 20. What to expect? Approach to economic calculations The cow level: reproduction The herd level: mastitis The herd level: PRRSV Country level: foot and mouth disease Human health: BSE Final remarks
  21. 21. Costs of mastitis Mastitis is a costly disease Estimiations between € 55 – 97 per cow per year ● The Netherlands: €78/cow/year (Huijps et al.,2008) ● USA: €61/cow/year (Bar et al., 2008) ● Sweden: €97/cow/year (Hagnestam- Nielsen and Østergaard, (2009) ● The Netherlands: €84/cow/year (Halasa et al., 2009) ● Sweden: €55/cow/year (Nielsen et al., 2010)
  22. 22. Total costs of disease These costs are only half of the story Definition of costs of an animal disease (McInerny et al., 1992): Costs = Losses + Expenditures ●Loss : Benefit taken away (our estimations) ●Expenditures : Extra input into livestock production (preventive measures)
  23. 23. Remember this one? High losses, low control expenditures Failure costs (€) Optimal Low losses, high control expenditures Preventive costs (€)
  24. 24. Material Questionaire dataset of 189 farms (Santman-Berends et al., 2011) ● General questions ● Livestock management ● Lactating cows ● Milking process ● Feed Pathogen dataset of 120 farms ● Pathogens present on individual farms Milk recording services dataset of 120 fairy farms ● Testday records (e.g. milk production, SCC)
  25. 25. Normative calculations losses
  26. 26. Costs of prevention When present the following were calculated according to Huijps et al. (2010): ● Cleaning cubicles ● Cleaning lanes ● Drying off ● Pre-stripping ● Clean dirty udders ● Milker gloves ● Clean cluster after clinical case ● Milk high SCC cow last ● Post milking teat disinfection ● Fixing cows after milking
  27. 27. Estimated costs (€/cow/year) for mastitis Average 5% 95% percentile percentile Clinical mastitis 62 16 151 Subclinical mastitis 14 9 21 Failure costs 76 26 164 mastitis Prevention costs 88 43 131 Costs of mastitis 164 99 281
  28. 28. Failure costs vs preventive costs
  29. 29. Cost-effectiveness of preventive measures -18 management measures (Huijps et al., 2010) -Quantify effect -436 scientific papers (1996-2006) -43 relevant and useful - Expert sessions -Effect 100 % contagious -Effect 100 % environmental -Efffect on BMSCC -Efffect on clinical mastitis
  30. 30. Additional Reduced expenditures losses Net benefitMilk cows with clinical mastitis last 37 16 -21Milk cows with subclinical mastitis last 104 20 -84Use of separate cloths during udder preparation 26 9 -17Wash dirty udders during udder preparation 3 9 6Prestripping 34 9 -25Use of milkers’ gloves during milking 1 9 8Post milking teat disinfection 31 31 -0Back-flushing clusters after milking a cow with clinicalmastitis 1 11 10Back-flushing clusters after milking a cow with subclinicalmastitis 123 15 -108Replace teat cup liners in time 13 11 -2Use of a treatment protocol 7 15 8Application of blanket dry cow therapy 9 36 27Keep cows standing after milking 2 12 10Feed additional dry cow minerals 13 13 0Prevent overcrowding 23 13 -10Clean boxes 54 15 -39Clean yards 51 8 -43Optimize feed ration
  31. 31. What to expect? Approach to economic calculations The cow level: reproduction The herd level: mastitis The herd level: PRRSV Country level: foot and mouth disease Human health: BSE Final remarks
  32. 32. Economic effects of PRRS• Decrease in litter size• Decline in average daily gain and feed efficiency• Reproductive losses• Increase of mortality• Increase in healthcare costs Costs of outbreaks: • Cost of outbreaks USA: € 255/sow (Holck and Polson, 2003) • Cost initial outbreaks NL: € 98/sow (Brouwer, 1994) • Mean loss per sow NL: €126/sow (€59 - €379) (Nieuwenhuis et al, 2012) Costs of endemic infection less clear
  33. 33. Methods• Two strategies: – Depopulation – repopulation – Herd closure with off-site rearing of weaned piglets • PRRS elimination reached after 4, 8 and 12 months. – Compared with old situation (endemic PRRSV)• Input parameters: – Farm production parameter-estimates derived from 900 Dutch sow farms (Topigs 2009) or aggregated production (deterministic) figures (Agrovision B.V., 2010) of 2009 – Additional parameters (stochastic and deterministic) derived from literature or experts: LEI & KWIN• Stochastic simulation model• Commercial production farm with 436 sows
  34. 34. Results Depop-repop, equal piglet price: Breakeven in 11.8 yrs Depop-repop, higher piglet price: Breakeven in 2.2 yrs Herd closure with elimination: Breakeven < 1 yr 1.5 2 P robability 1 .5 0 0 5 10 15 20 Years till breakeven 20% increase pigletprice no increase pigletprice
  35. 35. What to expect? Approach to economic calculations The cow level: reproduction The herd level: mastitis The herd level: PRRSV Country level: foot and mouth disease Human health: BSE Final remarks
  36. 36. Foot and mouth disease EU is free of FMD What do with outbreak? EU regulations Additional measurements Problem is: ● Stochastic ● Dynamic ● Spatial
  37. 37. Inter-FMD: a simulation model Monte Carlo simulation ● 100 replications to obtain insight in variation of outcomes Examples of output parameters ● number of infected farms ● duration of epidemic ● number of farms slaughtered, vaccinated, in MCZ,… ● number of animals slaughtered, vaccinated, in MCZ,… ● etc…… Output = Input economic model
  38. 38. What to expect…..• of an outbreak on a dairy farmsurrounded by •240 farms in a radius of 10 km (A) •1923 farms in a radius of 10 km (B)• using only EU measures?
  39. 39. EU control measures Sparse (A) Dense(B) 50% 95% 50% 95%# infected farms 3 38 1583 3621# prev. culled farms 8 49 679 1053# farms in MCZ (10km) 335 4,406 12,895 58,165Length epidemic (days) 38 105 375 end
  40. 40. Other measures (dense) EU Prev-1 Vacc-2 Vacc-4Farmsrendered 2.262 281 76 74vaccinated 0 0 593 1.184MC 12.895 3.447 3.318 3.334Animalsculled 569.476 65.066 16.230 15.718vaccinated 0 0 151.089 270.080Length (days) 375 60 62 57
  41. 41. Adding economics (* mln €) EU Prev-1 Vacc-2 Vacc-4 live cull live cullControl >4.620 421 94 174 80 235Consequential > 2.540 200 166 121 171 111Marketdamage > 499 511 623 467 636 477Total >7.659 1.132 883 762 886 824
  42. 42. What to expect? Approach to economic calculations The cow level: reproduction The herd level: mastitis The herd level: PRRSV Country level: foot and mouth disease Human health: BSE Final remarks
  43. 43. BSE 1986 first described 1996 -> link with Creutzveldt Jacobs Disease (vCJD) Since August 1989 measures against BSE in the Netherlands ● Since 1990 feed ban (no animal protein) ● Since 2000 dead cattle older than 30 m tested ● Since 2001 slaughtered cattle older than 30 m tested ● Disposal of BSE risk materials ● Culling of cohort of detected animal Incidence of BSE is decreasing ● 39 suspected cases in 2002 ● 7 suspected cases in 2005
  44. 44. Model Stochastic 3 types of BSE ● Clinically affected ● Test detectable ● Non detectable (3 for every detectable) Per BSE type of BSE load (from different organs) of the food supply was calculated Based on Infectious doses, risk of vCJD Prevented case of vCJD -> life years saved (most like 51)
  45. 45. Costs Removal of specific risk material (~60 kg): €/kg slaughtered weight Transport of specific risk material Post mortem testing: € 90 per head Costs of cohort culling
  46. 46. Results - retrospectiveYear 2002 2005Number of BSE cases (total, at slaughter) 24, 12 3, 2BSE load of the food supply Mean 5th – 95th Mean 5th – 95th.Baseline scenario 34,857 30,213-39,602 5,502 3,592-7,620SRM removal 2,330 2,020-2,648 368 240-509Post-mortem testing (PMT) 7,455 4,846-10,306 939 198-2,091PMT and cohort culling 7,059 4,505-9,865 939 197-2088SRM removal and PMT 498 324-689 63 13-140SRM removal and PMT and cohort culling 472 301-659 63 13-139Food risk (life years lost) Mean 5th – 95tb Mean 5th – 95th pct.Baseline scenario 16.98 8.66-26.70 2.69 1.25-4.61SRM removal 1.14 0.58-1.79 0.18 0.08-0.31Post-mortem testing (PMT) 3.63 1.67-6.27 0.46 0.08-1.11PMT and cohort culling 3.44 1.56-5.94 0.46 0.08-1.11SRM removal and PMT 0.24 0.11-0.42 0.03 0.005-0.07SRM removal and PMT and cohort culling 0.23 0.10-0.40 0.03 0.005-0.07
  47. 47. Costs (mln €) 2002 2003 2004 2005 Year SRM removal 19.22 18.27 19.29 19.82 Post-mortem testing 38.16 29.56 26.57 21.12 Cohort culling 6.97 4.80 3.41 2.43 Total costs 64.34 52.64 49.27 43.37
  48. 48. Cost-effectiveness
  49. 49. Cost-effectiveness 2002-2005
  50. 50. What to expect? Approach to economic calculations The cow level: reproduction The herd level: mastitis The herd level: PRRSV Country level: foot and mouth disease Human health: BSE Final remarks
  51. 51. Key messages from examples Inseminations ● Start early Mastitis ● Be careful with additional prevention ● Work farm-specific PRRSV ● Eradication iscost-effective Foot and mouth disease ● Have a good look at eradication programs Zoönoses ● Look at costs vs utility
  52. 52. Farmers underestimate costs of disease 200 180 160 140Real costs (€/cow) 120 100 80 60 40 46 under estimators 20 0 0 20 40 60 80 100 120 140 160 180 200 Expected costs (€ per cow) Huijps et al.,
  53. 53. There is more than economics Money is only one motivator for a farmer
  54. 54. Thank you for your attention On-line courses on @henkhogeveen Veterinary Economics on: animal-health-management.blogspot.com www.elevatehealth.eu

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